Which 1994 financial crisis began after Mexico devalued the peso?

The 1994 financial crisis that began after Mexico devalued the peso was the Tequila Crisis.

Mexico devalued the peso in December 1994 after pressure on its foreign-exchange reserves and fixed exchange-rate arrangement became unsustainable. The devaluation damaged investor confidence and triggered rapid capital outflows, causing the peso to lose much of its value.

The crisis spread through financial markets and affected other emerging economies. Investors reassessed the risks of holding assets in countries that depended heavily on foreign capital or maintained vulnerable exchange-rate systems. Mexico faced severe recession and financial-sector stress.

The United States and international institutions arranged a large rescue package, helping Mexico meet its external obligations and stabilize its financial system. The event is called the Tequila Crisis because “tequila effect” became a nickname for the way Mexico’s shock spilled into other markets. It is separate from the 1997 Asian financial crisis, despite some similar currency and capital-flow pressures.